The scrappage scheme may end but it won’t be finished

It was about this time last year that we were waiting for any kind of good news. Jobs were being lost profits were being haemorrhaged, businesses were going to the wall and there were weekly public hangings of bankers (ok perhaps that last one was just wishful thinking).

But suddenly, and against all the odds, an unlikely hero rode into town in the shape of Mandelson, lord of darkness. Under pressure from the UK car industry and after first making sure that it had been successful in Europe, with a flourish he gave us the scrappage scheme and as a recession busting bonus the Chancellor gave us a 2.5% discount on VAT.

This of course not only brought a massive feel good factor which whipped up demand and led to some great deals being done but in addition, as we in the trade acknowledge, because we pay VAT on the profit we make from selling a car, we could afford to do better deals and as a result everybody won.

So where is the good news coming from this year? Because after all with roughly 400,000 scrappage cars generating precisely zero part exchanges this will inevitably mean a dearth of used cars and with price rises in the pipeline and the extra taxation on new cars where are customers going to get their value from?
Well if you listen to the radio and read the newspapers you will no doubt be aware that we are already hearing the likes of Toyota introducing their own variant on the scrappage scheme (Toyota Swappage) where they can have the flexibility to widen the criteria and therefore capitalise on the good will and free marketing that arrived when the scheme was first introduced. We have also seen French car maker Renault subsidise the scrappage scheme in their home market, effectively making up the difference after the French government recently cut the subsidy, and if we remember back to before the start of the scheme in the UK, Citroen launched their own version of the scheme, capitalising on all the free publicity and anticipation.

Now clearly, as we have already indicated in previous articles, running their own versions of the scheme could be a viable proposition for many mainstream manufacturers and it will certainly be interesting to see if the other big players follow Toyota and attempt to keep the goodwill flowing well into 2010 once the official scheme is at an end.